District Energy and Amazon's HQ2 Decision

On September 7, Amazon announced it would begin a process to establish a second headquarters, potentially costing $5 billion to build and equip and providing workspace for 50,000 employees. Amazon opened the door to new metro regions across North America outside of Seattle.

With this announcement, Amazon issued a request for proposals (RFP) providing guidance as to what decision-makers would look for in a second home, already nicknamed HQ2. Cities and states are scrambling to build their cases and the competition is expected to be tight. Opinions will vary widely on the importance of many of the requirements laid out. But the RFP clearly states that Amazon “will develop HQ2 with a dedication to sustainability" and highlights how highly Amazon values the benefits provided by its district energy system at its downtown Seattle headquarters campus.

In a section on sustainability features on page four, the RFP shares how part of the Seattle campus relies on a district energy system to heat four million square feet of office space with waste heat from a neighboring data center. It explains that the district energy system is four times as efficient as a traditional, building-by-building heating scheme and is expected to help Amazon avoid close to four million kilowatt-hours each year.

According to Seattle City Light, the public utility that provides electric power in Seattle, a kilowatt-hour purchased by a large customer ranges from roughly five to eight cents depending on the time of day that it is purchased. While one might expect some negotiation around the exact rate Amazon pays for electricity, a simple, back-off-envelope calculation of savings achieved at the low end of the publicly available range suggests savings of two hundred thousand dollars each year. Such savings would be welcome by an organization of any size.

That Amazon’s guidance does not name electric and thermal grid resilience and reliability as decision drivers is somewhat surprising. In light of the recent flooding in Texas and Florida, the wild fires raging in California, or the magnitude 8.0+ earthquake in Mexico, resiliency and reliability should be factored into this type of long-term investment decision. Cities and states are beginning to see resiliency and reliability from enhanced critical energy infrastructure as selling points. Many mayors are seeking opportunities to partner with private developers to create microgrids - with district energy and combined heat and power systems at their heart - to strengthen business continuity and attract economic development.

It is not difficult to understand why Amazon would value the annual dollar and greenhouse gas savings that its district energy system provides. It is becoming more commonplace for value to be clearly attributed to resiliency and reliability services as well. Given the ability of district energy systems to provide all four objectives, it would not be surprising to see a district energy system featured prominently wherever Amazon’s new headquarters end up.